Insurance Reform: The Next Round

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The nation’s health insurers held their annual policy forum Tuesday at Washington’s Ritz-Carlton Hotel. I felt like I was attending chapel at the Alamo.

Several thousand people, many from labor unions, were demonstrating noisily outside. They called for a citizen’s arrest of the industry’s chief executives, who were safely ensconced in their executive suites hundreds if not thousands of miles away. Inside, a few hundred of the industry’s leading policy wonks, lobbyists and communications officials heard multiple sermons on the benefits of health care reform.

Karen Ignagni, the chief executive officer of America’s Health Insurance Plans (AHIP), sat impassively at the back of the ballroom ignoring the presentations. Her hands flew furiously over the tiny keyboard on her phone, while three security guards hovered nearby.

In 1993, the last time the nation tried comprehensive health care reform, she would have been outside on the streets. Before joining the insurance industry, she worked as the AFL-CIO’s top health care lobbyist. (The AFL-CIO is a federation of labor unions.)

Now, she faces a sullen membership that has become public enemy number one for those pushing reform. At a rally in Pennsylvania this week, President Obama showed flashes of his campaign brilliance by placing a bulls-eye squarely on the insurance industry’s collective back and firing away. “How much higher do premiums have to rise before we do something about it,” he cried.

The Hypocritic OathThere’s evidence to suggest the industry has played a two-faced game throughout the year- long debate over reform and earned some of the public opprobrium now coming its way. Last summer, Ignagni told The New Republic’s Jonathan Cohn that her group would back the major insurance industry reforms — no discrimination for pre-existing conditions; no more rescissions of policies after a person gets sick; a broader pool for individual and small group coverage — in exchange for legislative language requiring everybody to buy her industry’s product. It’s all in the bill.

Yet the National Journal reported in January that AHIP’s members surreptitiously helped fund the U.S. Chamber of Commerce’s ongoing campaign to defeat reform, which included a major television ad campaign attacking the Senate and House bills. The Chamber has spent somewhere between $70 million and $100 million on the campaign, with as much as 25 percent coming from the insurance industry.

Reform SchoolThe smiley face was clearly on display inside the ballroom. Presenter after presenter described in positive terms the cost-control elements of the legislation, and how it would benefit both Medicare and private insurers like themselves if they embraced the possibilities. Showing a picture of downtown Oakland, Peter Lee, head of policy at San Francisco-based Pacific Business Group on Health, which advises major employers that self-insure, said, “There’s a lot of there there.”

He cited bundled payments (to undercut fee-for-service medicine), demonstration projects in integrated care, and public reporting of quality outcomes and prices, which can be required by the new exchanges set up under the legislation. “You will have to fight for a role in the exchanges,” he exhorted the 250 executives in attendance.

Karen Davis, president of the Commonwealth Fund and a tireless advocate for universal coverage, called the numerous pilot projects for saving money through payment reform “really exciting.” She pointed to uniform payment projects underway in North Carolina and Indiana where all payers — Medicare, Medicaid and the private insurance industry — pay the same prices. If widely adopted, that would have an immediate impact on lowering insurance premiums, she said.

Yet many of the attendees weren’t convinced. “This isn’t about delivering system reform, it’s about insurance reform,” groused one executive from a Florida brokerage, who did not want to be identified. “This stuff isn’t easy,” said an attendee from Harvard Pilgrim Health Care, who also didn’t wish to be identified. He described the multiple physician practices within their far-flung networks that resist bundled payments and other cost-control measures. I cut him off.

Inflation SensationThe insurance industry has profited handsomely from the current system. Revenues from administration have gone up 111 percent in the past decade, according to statistics compiled by the Centers for Medicare and Medicaid Services, while overall health care costs have risen “only” 90 percent and prices in the general economy have risen just 25 percent. Only the drug industry, with a whopping 116 percent increase in revenue, has benefited more from the ever-increasing run-up in health care costs.

But it’s all relative. Doctors and hospitals have benefited, too, with revenues having gone up at around the same rate as overall health care spending. And those two groups account for well over half of all health care spending, while administration — which includes oversight of Medicare and Medicaid as well as fees charged by private insurers — comes to less than 7 percent of the total health care tab.

Attacking insurance companies “is an unfortunate deflection from the real issues,” Lee said. “The insurers are essentially a cost-plus business. Health care reform in the end has to be about changing the providers.”

spent 25 years as a foreign correspondent, economics writer and investigative business reporter for the <em>Chicago Tribune</em> and other publications. He is the author of the 2004 book, T<em>he $800 Million Pill: The Truth Behind the Cost of New Drugs</em>.